Minimum pricing for alcohol – a frequently asked question

Tomorrow the Health and Sport Committee is due to consider the secondary legislation which will bring minimum unit pricing (MUP) for alcohol into effect. This is almost 11 years after the Scottish Government first proposed the idea.

I have responded to a wide range of Members’ questions on the topic over that time. However, since the Supreme Court’s ruling in November last year, we have been asked one question repeatedly – where will the extra money go?

MUP is not a tax. It will be a condition of a licence that the holder of that licence does not sell a unit of alcohol below a certain price. That price is set to be 50p.

As such, any extra money from MUP will go to the licensed premises, whether it is a pub, club or supermarket.

The Scottish Government’s modelling of the policy looked at the impact on revenue and predicted that – with a 50p per unit price – revenue to off-trade retailers (i.e. shops) would increase by £41m per annum, but would fall by £7m for on-trade retailers (i.e. pubs/clubs).

As such, it is only the off trade sector that is expected to actually gain any revenue, although whether this will translate into profit is not yet known. This is because the modelling did not look at the response of the whole industry to the policy, including how wholesalers and producers will respond.

On the back of the question about the extra money, we have also been asked whether a ‘windfall’ could be recouped by Government in any way. As it stands the answer is ‘possibly’.

The bill which first attempted to introduce MUP became the Alcohol etc. (Scotland) Act 2010. This was passed without its flagship MUP policy, but it did contain a provision to introduce a ‘social responsibility levy’.

The purpose of the levy was to make licence-holders contribute to the costs incurred by local authorities in dealing with the adverse effects of alcohol.

The Scottish Government consulted on draft regulations for the levy, but it was never enacted. At the time, the Scottish Government said that it would not take forward the levy until the economic circumstances were right and once the Public Health Supplement had expired.

The supplement ended in 2015. It will be interesting to see if the Scottish Government now considers whether the economic circumstances are right to introduce the levy.

There may also be added pressure to introduce it given recent estimates from the Office for Budget Responsibility (OBR) suggesting the exchequer may lose £40m per annum in tax receipts as a result of MUP. This is because – if the policy is successful – it should reduce alcohol consumption and the associated tax paid. However, the £40m estimate from the OBR is somewhat at odds with the Scottish Government’s own modelling which is predicting a reduction of £15m.

What the actual figure is will only be known should the Scottish Parliament pass the secondary legislation and allow MUP to come into effect on the 1 May 2018.

Kathleen Robson, Senior Researcher, Health and Social Care